Wednesday, 11 May 2016

Tonight I shall be donning best bib and tucker and attending the premiere of Brexit: The Movie at the Odeon Leicester Square. Red carpet deal, the lot. I'm rather looking forward to it as you can imagine from the teasers.

If government wants to relieve the plight of low paid workers then there are a number of things they could do that wouldn’t involve meddling in the labour market at a cost of tens of thousands of jobs; but they’re looking at the problem from the wrong end of the telescope. Legislating to reduce the cost of living is a much more effective way of helping low paid workers than legislating to raise the cost of labour.

Let’s take as an example the average consumption of an adult in the bottom income bracket who smokes, drives a car and drinks alcohol. According to the Office for National Statistics this average low-income consumer spends £1,746 a year on tobacco taxes; £933 a year on motoring taxes; £278 a year on alcohol taxes; £1,165 on VAT. In all, 36.5% of the disposable income of low-income workers is spent on VAT and sin taxes. Halve sin taxes and reduce VAT to 15% and you could put £35 a week into the pockets of low-earners – and this would stimulate consumption and job creation. Of course, public health meddlers would have a fit if government were to reduce sin taxes – particularly on tobacco or alcohol; and government would have to wean itself off vanity projects and get its finances in order, so don’t expect any change in this direction soon.

It’s easier for government to bang on about the unhealthy consumption patterns of the poor, rather than admitting that its own taxes impoverishes them. The cost of sin is only going to rise with the introduction of the sugar levy – another measure that will disproportionately affect the poor. Someone needs to turn the telescope round.